OnLive CEO: “We Want to Be the Netflix of Gaming”

OnLive’s trying to change the way people play video games. First, they launched a beta of a new streaming service that let computer users play video games that are hosted on remote servers. This means that bleeding-edge, processor-intensive titles like Crysis can still be played on a computer with average technical specifications because all the heavy lifting is happening elsewhere. The beta served PCs and Mac and the new MicroConsole hardware’s bringing the experience to TVs. I reviewed the hardware last week and had a chance to talk to the company’s CEO Steve Perlman. Perlman’s a tech industry veteran, having done groundbreaking work on Apple’s Quicktime video compression as well as patenting the Mova Contour facial mo-cap technology used The Curious Case of Benjamin Button and The Incredible Hulk movies. Perlman discussed the launch of the tiny game-streaming box, the hopes that OnLive as a whole is trying to fulfill and surprising developments in the company’s future.

So, I think it’s safe to say that stage one of the OnLive concept is complete, right? The streaming service is out of beta and the MicroConsole is going out to people who pre-ordered. Can we just start at the impetus for the idea, and why do you think now is the time for on-demand gaming?

Well, this is an eight-year project. In fact, we’re coming up on nine. But, my team created WebTV. We were acquired by Microsoft and then ended up developing all of Microsoft’s television products, among them the Xbox 360 hardware.

And this is back in 2000-2002 when they’re working on these things. And I’m like, geez, this is going to be a very expensive system when it comes out in 2005, just because the visual computing demands–how real people want images to look–was growing a lot faster than Moore’s law. The chips weren’t keeping up with it. So I was thinking, boy, if game machines in 2005 costs this much, in 2010–because games are on a five year cycle–you are going to end up with a $2000 game machine. It’s just not practical.

So, I decided, “OK, let’s go set out on this journey.” We’ve got to find a way to not have the game machine in the home because we’ve run out of steam in terms of what we can do as far as engineering. All right, well, if they are not going to run in the home, they are going to have to run in a data center. And with that idea came the big challenge of “OK, how do we go and make it so that this game running a thousand miles away, feels like it’s running locally?” It was a very, very long journey. There was a lot of where we’re figuring out the compression algorithms and making it so that perceptually your eye doesn’t see any of the problems and it’s a very fast response.

But you still must’ve dealt with other issues besides the technology?

I’d say, the biggest thing we faced were the practical issues. The kind of stuff that everybody sees on the Internet from time to time, where they see stuttering videos or the quality goes down or it seems to stop all together. You can kind of put up with it when you’re watching a movie. You’re not going to put up with it when you’re playing a game. It took millions of connections across the United States to do the research.

Millions of connections to go and find out all the different kinds of things that can happen on people’s Internet connections or over their WiFi or what have you, until we were able to make it so that OnLive is almost all the time reliable. So that’s it. Then….

What were some things that you could not have anticipated along the way?

I mean, frankly, I wasn’t thinking that we were going to have a big recession. I didn’t think that there would be the rise of this used game market, either, where a third of all game sales are now used games, which of course puts a huge strain on the publishers and on the platform makers.

Because, the used game revenue doesn’t filter back to the game publishers or to Microsoft or Sony. The revenue stays within the retail store because they buy the used game and resell it. Before used games, what happened is, publishers would lower the price of the game as the game got less popular. So, to the end user, it would be a cheaper game regardless. Right?

Yeah.

But with the advent of used games, they’re getting the same thing going, but, none of the money is filtering back to the people who are taking the risk in creating the games. So, with OnLive, of course, you eliminate all that. There’s no need for used games. The publisher can price the games on a dime. In fact, on Black Friday, we had some publishers pricing their games 75% off that very day, and then it goes right up in price the next day. You know what I mean? You don’t have a brick and mortar having to put a new label on all the boxes when you change the price.